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When life throws up unexpected expenses—be it a medical emergency, wedding expenses, or home renovation—a personal loan is one option that can meet all your financial needs. It is an unsecured loan, meaning you don’t need to pledge any property to avail it.
Let’s understand in detail what a personal loan is, its benefits, and when and how to avail it.
What is a Personal Loan?
A personal loan is a loan that is not bound to be used for any specific purpose. This means you can spend it anywhere according to your needs. Banks, non-banking financial companies (NBFCs), and online platforms offer this type of loan.
To avail this loan, mainly your credit score (CIBIL score), income, and basic documents are taken into consideration.
Benefits of taking a personal loan
- No collateral required : It is an unsecured loan, in which you do not need to pledge your property, jewelry, or other assets.
- Freedom of use : The biggest advantage is that you can use it for wedding, medical expenses, travel, or other personal needs.
- Quick approval and fund transfer : The processing time of a personal loan is usually 24-72 hours, and the amount is transferred directly to your bank account.
- Less documentation : Most institutions only ask for basic KYC documents and proof of income.
- Flexible repayment options : You can repay this loan in a period ranging from 12 months to 60 months, making EMI planning easy.
- Low interest rate (on good credit score) : If your CIBIL score is 750 or above, you can get a loan at a low interest rate.
Eligibility for a Personal Loan
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You need to fulfil certain minimum requirements to get a loan:
- Age: Between 21 and 60 years
- Income Proof: Minimum ₹15,000/month salary or business income
- Credit Score: At least 700+
Important factors to consider before taking a personal loan
- Compare interest rates : Interest rates can range from 10% to 24%. Compare rates across different banks and platforms before availing it.
- Use an EMI calculator : Estimate the monthly EMI using an online EMI calculator. This will help you know how much your EMI will be.
- Pay attention to hidden charges : Know about fees like processing fees, pre-payment charges, and late payment penalty in advance.
When should you avail a personal loan?
- In case of emergency : For any medical emergency or sudden big expenses.
- For a big event : If the wedding expenses are going beyond your budget, then a personal loan is the right option.
- For travel planning : Many people also use personal loans for foreign travel.
Conclusion
Personal loan is a financial instrument that can help you at the right time. But it is very important to take it wisely and repay the EMI on time. This not only meets your current financial needs but also improves your credit history.
If you choose the right interest rate and loan tenure, it can bring financial security and stability in your life.
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